How India is Gearing up for an Unprecedented Food Revolution Given saturation in most global agriculture markets, including America and Europe, investors are beginning to take note of the potential of the Indian market

By Dr. Pablo Erat

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India's agriculture and food sector present the largest investment opportunity in the world, with the potential to absorb $33 billion over next five years. Through the recently held 'World Food India' event, India welcomed the world to support the transformation of this vital sector, resulting in an overwhelming response with an investment commitment of more than $18 billion from both global and domestic corporations and investment groups.

India's Agriculture and Food Sectors are Attracting Global Attention

Given saturation in most global agriculture markets, including America and Europe, investors are beginning to take note of the potential of the Indian market. The country has the world's second largest arable land resource of 159 million hectares and fifteen agro-climatic zones.

The rapidly expanding middle class with higher disposable incomes is creating unprecedented demand for quality food and trustworthy brands. At the same time, the country is transforming itself into a digital economy at an unprecedented speed even from a global perspective. However, the food production and the supply value chains are still highly inefficient and fragmented with tremendous improvement potential.

With a food market size of approximately $500 billion in 2022 from current levels of $350 billion, global companies are strategically positioning themselves to cater to this rapidly growing market that holds the potential to create compelling risk-adjusted returns in the medium term. The investment need for basic modernization of the agriculture and food sector is estimated to be around $25-30 billion with core infrastructure and public services funded by the central and state governments, enabling larger commitments from corporations, investment groups and development finance institutions.

Investors, wanting to access the right opportunities along the complex supply chains, with multiple stakeholders and high fragmentation, need to have a deep understanding of the space. In particular, investors often struggle to find strong entrepreneurs who have developed de-risked business models that are profitably scalable.

The abundance of capital globally coupled with limited suitable deployment options opens up tremendous opportunities for entrepreneurs focused on industrial-scale ventures with high standards of transparency and governance.

Macro-interventions Lay the Foundation for the Revolution

Translating this macro opportunity into tangible value creation for investors, entrepreneurs and the 100+ million farmers in India require robust business models that support front-loaded investments in agribusiness value chains. To accelerate the development of such models across the sector, a few critical enablers need to be actively established. Importantly, strong mechanisms have to be in place to support farmers with small land holdings via training, access to technology, high-quality agri-inputs, access to markets and timely low-cost financing.

In addition, land use reforms to support corporate farming are necessary to allow for economies of scale and enable farmers to join the mainstream economy through jobs and pensions. Also, the recent progress of digital infrastructure and subsidy administration needs to be fully leveraged. Finally, a culture of entrepreneurship needs to be supported to facilitate the emergence of role model agriculture and supply chain entrepreneurs in the country.

The government is playing a very active role in supporting the rural economy. In general, the state is allocating enough funds to support farmers and the rural eco-system but the allocation is not yet optimal. It is paramount that the focus is on investments in public services and core infrastructure components that make the sector attractive and more competitive.

A great example of this is the Aadhaar system which is the world's largest biometric ID system with almost 1.2 billion members. The government managed to get the system implemented and built a billion-strong user base faster than Facebook and Google, fundamentally changing the way business is done. It allows people - even in the most remote areas -- to open bank accounts within a few minutes, start transacting money over their mobile devices and create records of their financial transactions which can be used to secure timely financing.

In addition, government participation is needed to accelerate farmer education and training, a key to ensure quality at source and a greater share of the value reaching the farmers instead of intermediaries. The country urgently needs leading edge, application-oriented farmer training facilities which should be set up in collaboration with global experts and institutions to improve farming know-how, facilitate good practice sharing and develop fundamental business skills to foster grass-root entrepreneurship.

Finally, rigorous technology application will play a crucial role in the transformation and in many areas India has the potential to leapfrog this development. For instance, it is important to develop intelligent databases and information systems to enable precision farming. Powerful data capturing and analytics by all parties involved in the supply chain would ensure right inputs, early disease detection, improved water management, forecast demand (optimal price, quality and quantity) and an increase in supply chain efficiency and lesser wastage of produce.

Highly Attractive Business and Investment Opportunities are Emerging

From a micro perspective, there are plenty of interesting investment opportunities that would address the fundamental challenges within the sector and allow to create a significant positive impact on the rural eco system.Below a few examples are described just to give a taste of what is currently in the making.

Based on land-reforms, socially responsible and inclusive "partnership farming" and "corporate farming" models will become viable allowing farmer groups and companies achieve economies of scale and conduct investments to modernize farming and significantly increase both productivity and quality. As an example of partnership farming, our venture DFV - within only a few years - became India's largest producer of international quality bananas by importing best-practices from the Philippines and supporting thousands of farmers to fundamentally changetheir growing practices. As a result, the productivity per acre more than doubled which proportionally increased farmer income and a completely new quality level was reached to match international standards. Today, the venture is the largest exporter of bananas out of India and sells its products across the country under the Happy Banana brand.

Similar opportunities are found within most of the food value chains,which still today are highly inefficient and in the need of investments into post-harvest facilities, logistics, cold chains, and processing.To give an example, our venture MilkLane is on the way tofundamentally modernizethe dairy supply chain with a focus on producing and supplying consistent high-quality milk to industrial clients and consumers. The model is based on a pan-India network of modern semi-automated production units with 7-20 cows, village level bulk coolers for milk collection, digital quality assuranceand fully digitized supply chain processes allowing for real-time monitoring. Another example is Citrus Processing India, whichhas set up India's only industrial sized citrus processing facility with a capacity to process 140'000 tons of citrus fruits per year. The company has successfully launched aportfolio of international quality juice solutions that allow its clients to substitute juice concentrate imports and launch a wide range of new unique products for domestic and international consumer markets.

Another cluster of increasingly interesting opportunities is emerging within the data and technology subsector. For instance, technology enabled value chain financing solutions will help farmers - participating in structured value chains - get access to funds at viable interest rates and optimized insurance solutions will become attractive and affordable for the majority of farmers.

A significant potential will also be unlocked through "farm digitization" including areas such as livestock diagnosis, remote crop monitoring and digital farm extension services. In addition, market access will be enabled through e-channels allowing farmers to directly reach retailers and consumers and create their own brands(e.g. for organic and certified products). Also, the food supply chain will be digitized through cloud-based supply chain management solutions allowing for full transparency and traceability, information symmetry and robust supply/demand planning.

The Future Starts Now

To conclude, investors and entrepreneurs now have the opportunity to actively participate in the emerging food revolution and create attractive financial returns and viable earnings for the farming community.

At Pioneering Ventures, we aim to lead the way. We systematically address the core challenges and gaps by building industrial sized ventures that fundamentally transform critical parts of the farm-to-fork value chain. Our focus is not only on creating strongly de-risked and scalable investment opportunities but also to contributeto the development of rural India, with the target to ultimately improve the lives of millions of farmers in the country.
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Dr. Pablo Erat

Partner at Pioneering Ventures

Dr. Pablo Erat, Partner at Pioneering Ventures, is an entrepreneur, investor and a passionate triathlete. He has over 15 years of strategy consulting experience and strong entrepreneurial track record within various industries. He has over 8 years of leadership experience in the incubation and developmentof industrial-size agricultural and food supply chain investments in India.

Pablo earned his Master's degree in Strategy and Organization as well as his Doctorate at the Institute of Management (IFB) at the University of St. Gallen (St. Gallen, Switzerland).

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